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Wednesday, November 23, 2011

IURC Gives Green Light To Deal To Benefit Daniels Crony

A coal gasification deal hatched in order to make millions of dollars for Gov. Mitch Daniels' long-time political crony, Mark Lubbers, and his business associates at the expense of Indiana utility consumers was given the green light by members of the IURC appointed by Daniels to make that decision. Proving just how stupid Gov. Daniels thinks the public is, he claims the deal locks in low gas rates for 1.5 million users when it in fact guarantees the company run by his crony is guaranteed a rate for the natural gas his company produces at nearly double the current market rate for decades to come. The Star's John Russell reports on the latest decision that demonstrates that the IURC panel is nothing but stooges doing the bidding for governor's political cronies.

Gov. Mitch Daniels says it's a smart way to lock in low rates for Indiana's 1.5 million natural gas customers.

Indiana utilities and consumer advocates have warned it's a risky gamble that could backfire, forcing up monthly gas bills.

Smart or risky, a plan championed by Daniels to build a $2.65 billion coal-gasification plant on the Ohio River in southwestern Indiana has taken a big step toward reality.

On Tuesday, the Indiana Utility Regulatory Commission approved the project's most controversial aspect: a 30-year contract for the state to buy synthetic gas from the plant.

The Indiana Finance Authority will spend about $7 billion over three decades to buy synthetic gas from Indiana Gasification LLC.

The state agency would resell the gas on the national market.

Selling the gas at a profit would lower monthly bills for gas customers in the state. But selling at a loss would lead to higher bills . . .

Several Indiana utilities took a look at the project several years ago and balked at the idea of signing long-term orders with the plant. Without their support, banks would not finance the project. That prompted Daniels to get the state involved as a financial middleman.

Indiana Gasification is owned by New York investor Leucadia Corp., whose top Indiana executive is former Daniels chief of staff Mark Lubbers.

Under the plan, the Rockport gasification plant would take in 3.2 million tons of coal each year, produce 47 million BTUs of natural gas and sell 38 million of those BTUs at a firm price to the Indiana Finance Authority every year for 30 years. The state agency would resell the gas daily on the national market . . .

The risk for Indiana consumers is in the firm price. In sales on the open market, gas prices routinely rise or fall every day with supply and demand.

But the Rockport investors always would receive from the state a firm payment: about $7.57 per 1 million BTUs, or about $7 billion over 30 years. This would cover plant operations, coal costs, shipping the natural gas and loan repayments, plus a small profit of about 5 percent on the $500 million the investors plan to spend on the plant.

On Tuesday, natural gas futures were trading for $3.39 per 1 million BTUs, or less than half the price built into the state's model.

Nevertheless, the Indiana Finance Authority has projected that the project could cut the monthly bill for the average home by 71 cents. That would add up to savings for the typical home of $255.60 over 30 years, which means the gas-burning residents of the state altogether would save about $8.5 million per year.

Yep, this deal demonstrates how a man like Mark Lubbers, who has absolutely no background in public utilities or natural gas, can be tapped to run a company because he had the political muscle to convince Gov. Daniels to risk totally screwing over Indiana utility ratepayers in order to make his long-time political crony a multi-millionaire. Lubbers saw how much money rent-a-civic leader Jim Morris made off of his Indianapolis Water Company antics and wanted his piece of the political pie. Two of Daniels' five IURC members couldn't even cast votes on the deal because of their conflicts of interest.

Two of the five commissioners on the IURC, Kari Evans Bennett and Carolene Mays, have recused themselves from the Rockport matter. Bennett came to the IURC in January from Barnes and Thornburg, a law firm representing Vectren in the Rockport case. Vectren is on the record opposing the Rockport project. Mays is related to a Vectren director.

The IURC's three remaining commissioners -- James Atterholt, Larry Landis and David Ziegner -- voted for the project. All five commissioners were appointed or reappointed by Daniels.

Like I've said before, Indiana has the most corrupt public utility commission in the country. It's nothing but an auction run to line the pockets of the political cronies of whoever is running the state at the time. If the Public Integrity Section of the Justice Department was doing its job, it would have long ago assembled a team of investigators to unravel all of the shenanigans that have been going on at this state agency for decades regardless of which political party is in charge of the governor's office.

As for those 200 miners Daniels says will be put to work because of this deal, keep an eye on that claim. I'm told if Leucadia is looking to operate this new plant efficiently, it won't be buying Indiana coal because of the higher costs associated with using it to produce natural gas. Just a small detail I realize.

2 comments:

Another Republican 'anti-government' crusader doing what he does best - using the government to guarantee his wealthy friends make a huge profit at taxpayer expense. Neither the utilities nor Wall Street would underwrite this 'venture' by guaranteeing a long term price for the synthetic natural gas at twice the market price for natural gas - as the US enters an era of excess natural gas and low prices due to production of gas from shale by fracking. And the wealthy owners of Rockport would not put any of their own funds into this project. Another 'white elephant' like Great Plains, Terra Haute and Edwardsport.

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